Sunday, May 5, 2013

Thomson Reuters, TRI Buying income in a frothy market

Does price matter?Should you put new money into the market at this time?These questions are being considered by
every individual investor as well as every professional investor.Price does matter.Yet, even in a market that I would call frothy, you can find investments
to use for the income producing portion of your investment portfolio.

Stock
prices do matter.

Stock price and dividend income are what determine
your yield.In my 2011 and 2012
dividend machine portfolios, I paid weight on overall stock prices.However, individual stock prices determine
if the money you are investing will yield at least three percent.

In 2013, I am being pickier as I build the
portfolio.I am not picking the first
stock I find that meets my four criteria as I did in 2011 and 2012.I continue to comb through the available list
of stocks until I find one that fits my portfolio.Perhaps a better yield, increasing the yield
quicker, or being a better fit for diversification as well as other factors.

Add
money to a frothy market?

The stock market is a risky investment.But, I believe, every investment is
risky.I can make an argument that keeping
money in your own safe is risky.Over
the duration of this blog, stock prices have increased as earnings
increased.More recently, stock price
increases exceeded earnings increases.I
will leave it to the economists to explain why; yet, I would label this market
as frothy.

You cannot be a market timer trying to sell high and
buy low.However, you can be a
disciplined income investor and still find good investments in a frothy market.

Dividend
Machine Thomson Reuters, TRI:

I will bet that if you are considering stocks for
income, you are thinking of stocks like Kimberly Clark or Chevron or maybe
Apple.KMB at $105.38 is very close to
the 52 week high of $106.54.KMB is a
dividend machine by every measure.The
dividend increases have kept up with the stock price so the yield is just over
three percent.Similarly CVX at
$123.50 is at its 52 week high.Although CVX’s dividend has increased steadily, their dividend yield is
less than three percent.KMB has been as
low as $77.80 in the past year; will it go there again?CVX has been as low as $95.73 during the past
year; will it go there again?Apple’s
dividend is not close to three percent and their dividend history is too new to
place AAPL in the dividend machine category.

Technically, using my dividend machine criteria, you
could buy KMB but it is expensive in spite of our rule that price only matters
to determine the yield.CVX and APPL do not meet our minimum income
yield, therefore, they are not buys at this time.

DIVIDEND
MACHINE

5/6/2013

Thomson
Reuters

TRI

Price when profiled

$34.04

Last 4 Qtrs Earnings

$2.08

Last 4 Qtrs Dividends

$1.30

Current Qtr Dividend

$0.33

Annualized Div Yield

3.82%

No. Years Div Increase

since
2002

Debt/Equity ratio

0.45

I have another idea:consider Thomson Reuters, symbol TRI.TRI closed on Friday, May 3, 2013 at $34.04.This is a 52 week high but the yield on the
recently increased dividend is 3.82%.I can live with the high stock price to get 3.82%.The dividend has increased every year since
2002 and their D/E ratio is a very reasonable .45.I like their industry; intelligent
information for businesses and professionals.I would be willing to bet that you do not have a company like this in
your portfolio.

TRI was a dividend machine in 2012 and I will add to
my position.See a summary of TRI’s
dividend machine fundamentals in the table at the right.

Consider TRI for the income producing portion of
your retirement portfolio.

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Covered Call Opportunities

Square, symbol SQ, is my current favorite stock that is not a dividend machine. To turn it into an income investment, I use SQ's volatiity to buy when it dips and sell calls. See the table above. Note that this call is not included in the post published on 12/12/18 M*

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TheMoneyMadam's Story

My income investing success came from my experience managing my and other people's money since 1993. Successful income investing requires discipline. In this blog I provide specific investments based on my principles of conservative income investing. I hope to help the thousands or even millions of people who have saved and want to invest their nest eggs to retire with income that grows. M* MoneyMadam

Disclaimer

Information on this blog does not constitute investment advice. Review or mention of any stock, bond, or other investment shall not be considered a buy or sell recommendation. Everything in this blog is the opinion of the author and no warranties are expressed or implied. M*MoneyMadam.